COMMODITY MARKETS

Energy firms dive in Asia after oil collapse

Hong Kong, China | AFP | Friday 5/5/2017 – Energy firms were among the main losers in Asian trade on Friday following a plunge in oil prices fuelled by fresh global glut concerns with most equity markets heading for a negative end to the week.

While traders are looking ahead to the release of crucial US jobs data later in the day, the collapse in crude prices has dented optimism on trading floors with analysts warning about the possible effects on the economy.

Both main contracts tanked almost five percent Thursday on fears about increased production from the US, Libya and Nigeria, and the OPEC cartel’s commitment to extending an output cut beyond a six-month agreement.

Renewed weakness in China, an expected hike in US interest rates – which could make dollar-denominated oil more expensive to holders of other currencies – and signs of slowing demand have also contributed to the dive.

“OPEC has been looking down the barrel so to speak, of resurgent supply from Nigeria and Libya amongst OPEC and of course, American shale, which combined have completely offset the 1.8 million barrel a day production cut agreement,” said Jeffrey Halley, senior market analyst at OANDA, in a note.

“There was no light at the end of the tunnel for OPEC and non-OPEC producers… in fact, the light turned out to be the train coming the other way.”

While both contracts edged up slightly in Asia, they are now sitting at their lowest levels since OPEC and Russia agreed in November to cut back production in a bid to raise prices.